UPDATE 1-Competition weighs on Kellogg's quarterly sales

Thu May 1, 2014 9:06am EDT

* First-quarter earnings $1.01/shr vs est $0.97/shr

* Net sales fall 3.1 pct to $3.74 bln vs est $3.81 bln

* Sales at U.S. morning foods business decline 5.5 pct (Adds details, background, analysts' estimates, shares)

May 1 (Reuters) - Kellogg Co reported a bigger-than-expected fall in quarterly revenue as competition from private-label brands and alternative breakfast items ate into cereal sales in the United States.

The world's No. 1 maker of breakfast cereals has been struggling with stiff competition from General Mills Inc and cheaper private-label brands, as well as the rising popularity of other breakfast items, such as frozen egg sandwiches and yoghurt.

Sales at Kellogg's U.S. morning foods business, which includes cereals such as Corn Flakes, Froot Loops and Special K, fell 5.5 percent in the first quarter ended March 29, its fourth straight quarterly decline.

The company has invested in packaging, shopper programs and mobile and in-store ads to stem the decline in sales.

Kellogg launched in November a cost-cutting program, dubbed "Project K," under which it planned to cut about 7 percent of its workforce and create regional hubs that would put resources closer to its plants.

The cost cutting helped Kellogg top first-quarter profit estimates. Excluding items, the company earned $1.01 per share, compared with the average analyst estimate of 97 cents.

Chief Executive John Bryant said in a statement on Thursday that the company expects top-line performance to improve over time and reiterated its full-year forecast.

Net sales at Kellogg, also known for its Pringles chips and Keebler cookies, fell to $3.74 billion, below the average estimate of $3.81 billion.

The company's net income jumped 32 percent to $406 million, or $1.12 per share.

Kellogg's shares have risen 9.4 percent this year to Wednesday's close of $66.83 on the New York Stock Exchange. (Reporting by Maria Ajit Thomas in Bangalore; Editing by Saumyadeb Chakrabarty)

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